Acting Prime Minister Winston Peters wants to see house prices no higher than five times income for young home buyers, but won’t say if he wants house prices to fall.
The most recent data shows the median house is valued at just over six times household income as an average across the whole country.
But that number rockets to more than nine times income when looking at Auckland alone.
Speaking at his weekly post-cabinet press conference, Peters said he looked forward to the day when a young couple can “prospect no higher than five times their annual income.”
This is the Government’s “long-term objective,” he says.
He does not expect this to happen in this Government’s first term, and not necessarily its second term either.
“But we will get there with these policies,” he says.
The Government has several policies which it says will increase the supply of houses in New Zealand, as well as raise incomes.
These include its plan to build 100,000 KiwiBuild homes in 10 years, as well as banning foreign buyers from the housing market.
The Government is also increasing the minimum wage to $20 an hour by 2020.
“It is our long-term objective to ensure first home buyers can obtain their first home that is [in] a way which is affordable without the desperation which I’m seeing today.”
He says many couples are paying 65% of their weekly wage just to secure the mortgage, rates and insurance.
“If you ask me, do I want to see us dramatically improve that? Yes, I do.”
He would not say whether he wants house prices to fall – “I’m not that naïve,” he told reporters.
But he says under this Government, wages are going to increase “significantly.”
As well as increasing wages, it’s the Government’s job to make sure business’ profits increase as well.
“We understand that we can improve business outcomes, that are better able to handle better wage outcomes for their workers and we will all be better off.”
In its most recent Financial Stability report, the Reserve Bank says over the past year, credit growth has declined and house price inflation has stabilised.
“This is in part due to banks tightening mortgage lending standards, which has led to a reduction in the share of new mortgage lending at high debt-to-income ratios and on interest-only terms.”
The report says these are “positive developments for reducing financial system risk.”
The second phase of the Reserve Bank Act review is currently underway and part of that will address whether the Central Bank needs to add debt-to-income (DTI) restrictions to its macro-prudential toolkit.